Many business deductions and credits affected by provisions of Tax Reform Act of 1986

Article Abstract:

Under the Tax Reform Act of 1986, the process of determining a taxable year will be changed to a "majority interest" rule for partnerships, to the calendar year for personal service corporations, and to "permitted years" for Subchapter S corporations. These rules for defining tax years are explained and examples are given to clarify their application. The Act also makes several changes in the tax treatment of golden parachute payments to departing executives; these rules are explained. Small businesses and corporations with no readily traded securities are exempted form some of the new provisions governing the taxation of golden parachute payments, and the Act clarifies the definition of "reasonable compensation." The types of research expenditures that qualify for research tax credits and the method of computing such credits has been modified by the Tax Reform Act as well. Other tax reform provisions involving changes in general business credits, business energy credits, targeted jobs credits, and amortization provisions are also discussed.

Finance, taxation, & monetary policy, Analysis, Interpretation and construction, Tax law, Tax reform, Tax deductions, S corporations, Tax credits, Golden parachutes, Deferred tax (Accounting)

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RA '87 redefines publicly traded partnerships as corporations

Article Abstract:

The Revenue Act of 1987 has reclassified some publicly traded partnerships (PTPs) as C corporations. In order to avoid being treated as a corporation, a PTP must derive at least 90 percent of its income from passive types of 'qualifying income'. Qualifying income usually consists of interest, dividends, rent from real property, or gains from the sale or disposition of real property, and gains from some types of natural resource activities. Other changes under the Revenue Act that will affect partnerships include the unrelated business income tax for some tax-exempt organizations, and the estate tax treatment of some partnership interest transfers by decedents.

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Corporations can use a partnership to increase benefits from R&D expenses

Article Abstract:

Corporations that form partnerships to conduct research and development operations can realize tax benefits. The three factors obtaining the tax benefits of a partnership are the status of the partnership, the deductibility of the partners' expenses, and the research credits given to the partners. The tax benefits of research partnerships have become increasingly important with the repeal of the investment tax credit.

Accounting and auditing

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